It was expected to be a future ready budget and the overtones in the power corridors were also self-congratulatory in advance. It finally turned out to be pretty ordinary budget for the real estate sector. The stakeholders are nevertheless looking for the silver lining here and there. The most critical stakeholder, the home buyer, is pretty disappointed with the Union Budget 2021-22.
The Union Budget 2021-22 scores less hits and more misses in the final analysis. For the real estate sector that is seen with renewed optimism to play a critical role in the revival of the Indian economy, it has been another disappointing budget. The stakeholders, conscious not to be seen on the wrong side of the power corridors, are deliberately looking for the silver lining to count on the blessings.
The lyrics of the 1946 Hollywood movie “Till The Clouds Roll By” sums up the mood of the real estate stakeholders:
“Look for the silver lining
Whenever a cloud appears in the blue
Remember, somewhere the sun is shining
And so the right thing to do is make it shine for you,”
The Union Budget by an large has failed to address the concerns of both the real estate developers as well as the home buyers. Though the BSE Realty Index was in Green zone post the budget announcements, the ground realities of the business clearly indicate that the Union Budget failed to address the larger concerns of the sector.
Union Budget 2021-22: The Dream
Encourage home buyers who can afford to buy
Enable potential home buyers who can’t afford to buy
Encourage NRIs to invest in Indian property
Enable supply side to maintain liquidity
Support the segments that have taken hit in Corona
Encourage affordable housing, low cost housing & rental housing
Union Budget 2021-22: The Reality
No focus on job creation
No new tax exemptions for home buyers
No moratorium or restructuring for existing buyers in job losses
INR 1.5 lakh principal deduction extended but limited to INR 45 lakh
Section 24 tax rebate not hiked beyond INR 2 lakh
ITC with GST not restored
Asset monetization objectives not clear
Key infra projects delayed but new projects like economic corridors announced
Debt financing of InVITs & REITs allowed
Recapitalization of public sector banks
Tax deduction for rental housing announced without specifics
Silver Lining as usual
The real estate stakeholders, as usual, are looking for the silver lining and the industry voices have guarded optimism to the extent that there is no criticism over many of their long pending demands being ignored.
Ashok Mohanani, President – NAREDCO Maharashtra lauds the Union Budget when he says that the Government has put their best efforts to put the economy back on track after the adverse effects of Covid-19 pandemic that the entire country went through. It has focussed a lot on infrastructure in this budget. This will indirectly help boost the housing demand especially in the Tier II & III cities. The Government’s continuous efforts to promote ease of doing business and digitization will help the real estate sector business in a long way going forward. As anticipated, it is a very futuristic budget from the economy point of view.
“The Government’s decision to further infuse INR 20,000 crore for public sector banks will help address liquidity issues to a large extent. The proposal to extend the INR 1.5 lakh benefit on interest paid on affordable housing loans by one year to March 31, 2022 is an exceptional move which will boost the affordable housing segment and help to achieve the Prime Minister’s vision of Housing for All. It will also ensure that more and more homebuyers get to avail this benefit. The reduction in tax burden on senior citizens above 75 years will give a push to the senior living projects,” says Mohanani.
Kamal Khetan, CMD, Sunteck Realty echoes the similar sentiments when he says the Union Budget has packed some great ideas and a definite direction for strong economic growth ahead, especially through infrastructure, capital expansion and banking and financial services.
“For real estate, the move to extend the tax holiday available for the purchase of affordable houses as well as for the affordable rental housing projects is a welcoming move as it would further strengthen the confidence among both developers and homebuyers. The move will certainly prompt more demand, especially among first-time buyers who generally fall in the lower and mid-income segments. Also, the extension of the tax holiday on affordable housing projects for developers by another year will increase the project launches in this segment as they would get additional time and resources. Apart from this, the mega infrastructure development and upgradation to be undertaken across India will add much value to the real estate sector,” says Khetan.
J C Sharma, Vice Chairman & Managing Director SOBHA Ltd lauded some of the proposed steps related to the housing segment that would give a fillip to the buyers of affordable homes as the time period of taking loans to buy such homes have been increased by another year. According to him, it is heartening to note the Government’s focus is on Housing for All and affordable housing as priority areas. Additionally, the announcement of tax holiday for the affordable housing developers for one more year for developing affordable rental housing projects as a part of the Pradhan Mantri Gareeb Awas Yojana– Urban to ensure affordable housing for the migrant workers is admirable.”
“These proposed steps will strengthen the overall real estate sector and boost confidence amongst buyers and builders alike. However, if long standing demands of the sector like granting industry status, rationalising the GST rates (by allowing the Input Tax Credit), access to funds and ensuring longer repayment cycles, lowering tax on raw materials, and increasing INR 2 Lakh tax rebate on housing loan interest rates to at least INR 5 Lakh could have been taken, that would have gone a long way to support the real estate developers and generate healthier housing demand. This would have had a lasting positive ripple effect on the national economy,” says Sharma.
Sankey Prasad, CMD(India) with Colliers International believes overall the Union Budget for FY 2021-22 is positive as its driven primarily by an impressive 34% increase in capex investments in the construction and development of real infrastructure. These investments will spur large scale construction activities, which will create many more jobs, generate more income and boost overall demand in the economy. Not burdening the citizens and businesses of the country with additional taxes is very welcome and will go a long way in strengthening confidence in our economic recovery.
“There were no specific announcements to boost the ailing real estate sector, other than the extension of incentives for interest payment on affordable homes by another year, tax incentives for notified affordable rental housing and some tax relief for dividends received from REITs. The sector needs to be nurtured in-toto for its contribution to GDP specifically, but more importantly, for being a necessary input in all economic activities,” says Prasad.
Track2Realty has following unanswered questions:
Q: Why is sector silent on industry status not granted?
Q: Has demand of single window clearance been put on the back burner?
Q: Are developers happy with INR 45 lakh capping of affordable housing?
Q: Is demand for affordable housing to accorded infrastructure status still there?
Q: Is tax exemption for the home buyers no one’s agenda?
Q: Hasn’t GST exemption on under construction been growth catalyst?
Q: Why is there silence on Input Tax Credit not been allowed?
Unfortunately, the leading voices within the sector would not like to answer these question and be seen on the wrong side of the power corridors.
Ravi Sinha
@ravitrack2media
Track2Realty is an independent media group managed by a consortium of journalists. Starting as the first e-newspaper in the Indian real estate sector in 2011, the group has today evolved as a think-tank on the sector with specialized research reports and rating & ranking. We are editorially independent and free from commercial bias and/or influenced by investors or shareholders. Our editorial team has no clash of interest in practicing high quality journalism that is free, frank & fearless.
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